Nigeria may borrow to fund subsidy – Sanusi
From Our reporter
Friday, April 20, 2012
• Sanusi
Governor of the Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi, has warned that the Federal Government may be compelled to fall back on past savings or even borrow more, to finance the 2012 Budget, due to shortfalls in oil subsidy revenue.
He told Rueters news agency in an interview that unless the N888 billion allocated for oil subsidy payment was enough, the nation may need to borrow more, or even fall back on Excess Crude Account, to finance the budget. Nigeria scrapped subsidies on gasoline imports on January 1, potentially saving the country over N1 trillion. But more than a week of strikes and protests erupted across the country against the higher cost of motor fuel, forcing the government to partially reinstate them.
It would be recalled that the 2012 Budget, signed by President Goodluck Jonathan last week, allocated N888 billion for fuel subsidy payments. If this is insufficient they will have to find more money or stop paying, which is unlikely, given public reaction in January. “With oil prices where they’ve been since the beginning of the year I’m sure that we will be exposed to that amount long before the year runs out,” Sanusi told the Reuters Africa Investment Summit.
“If I was asked for advice I’d simply say pay what you have in the budget and simply stop paying. (If not) They take the money from the excess crude account (or) you’ve got to borrow money,” he added. Jonathan came to power last April, promising to tackle Nigeria’s wasteful governance, and Sanusi praised the budget last month for being more fiscally disciplined. Nigeria is supposed to save money on the benchmark price, of $72 a barrel in the 2012 budget, into an excess crude account to cushion the economy against potential oil price shocks.
But the account has been repeatedly raided by politicians and despite record high oil prices it had only $3.5 billion earlier this year, down from some $20 billion in 2007. But this won’t last long if subsidy payments overshoot demand, Sanusi insists. Nigeria’s total debt is about 20 percent of GDP, which is comfortable compared with other African countries, but, Sanusi argues, poor for a country pumping as much oil as Nigeria. Debts are rising despite high oil revenue and economists are concerned that borrowing is increasingly internal, which means from banks and pension funds. If the government fails to pay then other parts of the economy are at risk.
Nigeria relies on crude exports for more than 80 per cent of government revenues and budgets for this amount based on the benchmark oil price and assumed production, which was set at 2.4 million barrels per day this year. This is at the top-end of actual production last year and if there are any output shortfalls, which have been common in the past, government will have to borrow to cover any shortfall. “(The output) assumption was too optimistic … based on the most rosy forecasts of operating environment,” Sanusi said.
“When you’ve got militancy, you’ve got production shortages, you’ve got natural operational failures, a more conservative output figure to begin with would have been better,” he declared. High oil prices have enabled Nigeria’s economy to grow at more than 7 per cent a year but poverty is rising.
